About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Eastern Cape High Court, Port Elizabeth
SAFLII
>>
Databases
>>
South Africa: Eastern Cape High Court, Port Elizabeth
>>
2013
>>
[2013] ZAECPEHC 25
|

|

Bester NO and Others v Master of the High Court, Eastern Cape High Court, Port Elizabeth (1558/2012) [2013] ZAECPEHC 25 (7 May 2013)

NOT REPORTABLE
IN THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE, PORT ELIZABETH
Case No.: 1558/2012
Date Heard: 28 March 2013
Date Delivered: 7 May 2013
In the matter between:
LAMBERTUS VON WIELLIGH BESTER NO
...........................................
First
Applicant
CHRISTOPHER PETER VAN ZYL NO
................................................
Second
Applicant
ESME MAGRIETA DORFLING NO
.........................................................
Third
Applicant
P Q NAIDOO NO
...................................................................................
Fourth
Applicant
(in their capacities as joint liquidators of
Innova Holdings (Pty) Limited (in Liquidation) –
Master’s Ref: S60/2009
(“Innova”)
and
THE MASTER OF THE HIGH COURT,
EASTERN CAPE HIGH COURT, PORT
ELIZABETH
...................................................................................................
Respondent
Nature
of matter:
Company law - Liquidation -
Application – applicants seek to review and set aside the
reduction of their remuneration, as set out in their first
liquidation
and distribution account, by the respondent in terms of
the provisions of section 384(1) and (2) of the Companies Act 61 of
1973
Order:
In all the circumstances the argument that it would have been
wrong, as a matter of law, to have regard to proceeds of the sale of

the encumbered assets in the present matter when assessing the
remuneration of the applicants on the presentation of the account

cannot be upheld. It follows that the decision of the respondent was
materially influenced by an error of law (PAJA section 6(2)(d)),
was
taken for a reason not authorised by the Companies Act, the
Insolvency Act or the regulations (PAJA section 6(2)(a)(1) and

6(2)(e)(i)) and took into account irrelevant considerations (PAJA
section 6(2)(e)(iii)) and both the decision and the direction
which
flowed from it fall to be set aside.
Order
is as follows:
The
decision of the Master to tax down the applicants’ fees to nil
in respect of encumbered assets 1, 14, 15, 16, 17 and
18 in the
liquidation of Innova, is set aside;
The
direction by the Master to the applicants to amend the first
liquidation and distribution account of Innova dated 30 November

2010, to reflect the applicants’ fees as nil is set aside.
The
respondent is ordered to pay the costs of the application.
___________________________________________________________________
JUDGMENT
EKSTEEN J:
[1] The applicants are the duly appointed joint liquidators of Innova
Holdings (Pty) Ltd (in liquidation) (herein referred to as
“Innova”).
In this application they seek to review and set aside the reduction
of their remuneration, as set out in
their first liquidation and
distribution account, by the respondent in terms of the provisions of
section 384(1) and (2) of the
Companies Act 61 of 1973 (“the
Companies Act”).
[2] It is common cause between the parties that the Companies Act
finds application to the winding up of Innova. The remuneration
of
liquidators is regulated by section 384 of the Companies Act. Section
384 provides as follows:
“
(1) In
any winding-up a liquidator shall be entitled to a reasonable
remuneration for his services to be taxed by the Master in
accordance
with the prescribed tariff of remuneration …
(2) The Master may reduce or
increase such remuneration if in his opinion there is good cause for
doing so, and may disallow such
remuneration either wholly or in part
on account of any failure or delay by the liquidator in the discharge
of his duties.”
[3] The “prescribed tariff to which reference is made in
subsection (1) is contained in annexure “CM104” to
regulation 24 of the regulations for the winding-up and judicial
management of companies. The remuneration of a liquidator appointed

to attend to the winding-up of a company is the same as that which
applies in the case of a trustee of an insolvent estate in terms
of
section 63(1) of the Insolvency Act, 24 of 1936 (“the
Insolvency Act&rdquo
;). The applicable tariff is tariff B as
contained in the second schedule to the
Insolvency Act
(“the
tariff”). The tariff prescribes that a liquidator‘s
remuneration is determined on the basis of specified
percentages of
various different items. These include 10% on the gross proceeds of
movable property sold or on the gross amount
collected under
promissory notes for book debts, and 3% on the gross proceeds of
immovable property and other assets sold.
[4] The applicants set about their task to liquidate Innova and sold
both movable and immovable property as discussed hereafter.
They
presented their first liquidation and distribution account (herein
referred to as “the account”) in which they
reflected
their remuneration in accordance with tariff B. The respondent taxed
certain items down “to nil” and instructed
the applicants
to amend the account.
[5] The applicants seek an order setting aside the respondent’s
decision to tax down their fees “to nil in respect
of
encumbered assets account numbers 1, 14, 15, 16, 17 and 18” and
a further order to review and set aside the respondent’s

direction to them to amend their account so as to reflect the
liquidator’s fees in respect of these items as nil.
The background
[6] The sorry tale of the winding-up of Innova has an unduly lengthy
history. The applicants were appointed as liquidators of Innova
on 2
July 2009. They took control of and administered the property and
affairs of Innova and proceeded to liquidate it. On 1 December
2010
the applicants lodged the account with the respondent as contemplated
in section 403 of the Companies Act.
[7] Included in the account was the encumbered asset account number 1
in respect of immovable properties bonded in favour of Absa
Bank
Limited (Absa) which had been sold at an auction which had been
authorised and approved by Absa. At the time of the submission
of the
account Absa had not yet proved any claim in the insolvent estate and
accordingly the applicants did not allocate these
proceeds for
distribution and did not allow any dividend in favour of Absa in the
account.
[8] The account also included encumbered asset account numbers 14 and
15 in respect of a Toyota Dyna motor vehicle and a Tata 7135
Tipper
respectively. Both these vehicles had been subject to instalment sale
agreements in favour of Absa. Both were sold on 9
September 2010 by
public auction with the approval of Absa and the proceeds collected
by the applicants. Again Absa had not proved
a claim against the
insolvent estate at the time of the submission of the account and
again these proceeds were dealt with in the
same manner as the
proceeds collected from the sale of the immovable properties to which
I have referred above.
[9] Finally the account included encumbered asset account numbers 16,
17 and 18 which were in respect of two Kia work horses and
a Volvo
BL71 respectively. These assets too had been sold by public auction
with the approval of Absa and the proceeds collected
by the
applicants. These proceeds were dealt with in the same manner as the
previous assets set out above and for the same reason.
[10] The delivery of the account to the respondent was followed by a
deathly silence. Accordingly, on 20 December 2010 the first

applicant, acting on behalf of the applicants, addressed a letter to
the respondent in which he stated that the applicants await
a receipt
of the respondents query sheet. In this regard the applicants allege,
and it is not in dispute, that it is customary
for liquidators, after
submission of an account and prior to advertising the account for
inspection, to request the Master to consider
whether the account was
in any way incorrect as contemplated in section 407(3). If the Master
had reservations then, in the general
course of events, he would
direct a query sheet to the liquidators and give directives in
respect of any errors.
[11] Notwithstanding the letter of 20 December 2010, no response was
received from the respondent. A second letter was addressed
on 17
January 2011 which referred to the earlier letter and again requested
the delivery of any query sheet as a matter of urgency.
This too did
not have the desired effect and a third letter was addressed in
similar terms on 1 March 2011. Again the applicants
were not favoured
with the courtesy of a reply.
[12] On 15 June 2011 the first applicant yet again addressed the
respondent pointing out that more than seven months had now elapsed

without the acknowledgment of receipt of any of the previous
communications or receipt of the customary query sheet. First
respondent
recorded that he intended now to assume that the
respondent had found the account to be in order and that he would
accordingly
proceed to advertise the account for inspection. Again no
response was received to his correspondence.
[13] In view of the aforegoing the first respondent arranged for the
account to be duly advertised for inspection on 1 July 2011
as
contemplated in section 406 of the Companies Act, and at the same
time, he addressed a letter to the respondent advising that
he had
arranged for the advertisement in the Government Gazette to be
published on 1 July 2011 for the account to lie for inspection
for a
period of fourteen days before the respondent. This letter too
remained unacknowledged and the respondent was not moved by
its
content.
[14] The account lay for inspection for a period contemplated in
section 406(1) of the Companies Act which period expired on 15
July
2011. No creditor, including Absa, raised any objection to the
account. In these circumstances the first applicant again addressed

the respondent on 17 August 2011 and 24 October 2011 in which he
requested the respondent’s confirmation notice in respect
of
the account as a matter of urgency. Still he did not receive as much
as an acknowledgment of receipt. In the circumstances,
on 27 October
2011, whilst attending a meeting in Pretoria, the first applicant
enlisted the assistance of the Chief Master to
look into the matter.
This prompted a response from the respondent on 16 November 2011,
almost an entire year after the account
was lodged. In this letter
she, one Lampbrecht, set out various requirements. She recorded,
inter alia
, as follows:
“
1.4
Liquidator’s fee in respect of encumbered assets 1, 14, 15, 16,
17 and 18 has been taxed down to nil as there is no benefit
to
creditors, amend.”
[15] It is not in dispute that this recordal constituted both a
decision in respect of the applicants’ fees relating to the

itemised accounts, and an instruction to amend the account.
[16] This prompted the application for review. In the answering
affidavit the respondent denies that the decision is prone to being

set aside. The deponent, Lampbrecht, explains the basis as follows:
“
I say
so because the Liquidation Account in question is a First account,
the Applicants are still to make a Final Liquidation Distribution

Account. Once that Account is submitted, a new assessment shall be
made as to whether or not the Liquidators are entitled to the
fee
they claim for work done. In this instance, it must be stressed that
the entitlement of a Liquidator to a fee is not automatic
on the
performance of any task such task must be result in the achievement
the primary objective for which the task is undertaken
…. Only
once the Respondent is satisfied that there has been a due discharge
of the responsibility and duty of the Liquidator
as aforesaid that
that the Respondent will allow a fee.” (
Sic
)
[17] Later Lampbrecht explains that:
“…
[A]s
long as the claim of creditor has not yet been proved and not yet
been met, the exercise of the disposal of assets and acquisition
of a
cash flow against it is an incomplete exercise if its purpose is not
to grant to creditors what is due to them.”
[18] After the replying papers had been filed the respondent applied
for leave to file a further affidavit because Lampbrecht contended,

on reflection that “the basis upon which certain fees of the
[a]pplicants were not accepted, may not have emerged clearly
from
what is set out in the previous affidavit”. In the
supplementary affidavit Lampbrecht explains that, where no claims
are
proved in respect of an encumbered asset then, depending on the
nature of the asset, the proceeds from the disposal thereof
must
either be paid into the Guardian’s Fund or distributed as free
residue. Lampbrecht states that “[i]t is only when
the actual
distribution occurs that a liquidator can be said to have completed
his or her functions and obligations with regard
to the disposal of
the relevant asset and the distribution of the funds obtained
pursuant thereto, and it is only then that the
liquidator is entitled
to raise a fee in respect of such asset”.
[19] In the alternative to this argument, in the opposing affidavit,
Lampbrecht acknowledges that her decision on 16 November 2011
is
indeed an administrative decision as contemplated in section 1 of the
Promotion of Administrative Justice Act, 3 of 2000 (“PAJA”)

and that in making her decision she was purportedly acting pursuant
to the powers vested in the Master by section 384(2) of the
Companies
Act to which I have referred above. She did not deny that her
decision was procedurally unfair. She did, however, deny
that her
decision could be set aside under PAJA for other reasons.
The merits
[20] It is common cause that Lampbrecht purported to act in terms of
the provisions of section 384(2). Where a party is aggrieved
by a
decision taken by the respondent in terms of the provisions of
section 384(2) he is entitled to bring such decision under
review by
a court. (See
Nel and Another NNO v The Master (Absa Bank
Limited and Others Intervening)
2005 (1) SA 276
(SCA) at 286C
and 290F; section 339 of the Companies Act; section 151 and 151
bis
of the
Insolvency Act.) It
has long been accepted that the review
envisaged by
section 151
of the
Insolvency Act, as
is the case here,
is the “third type of review” identified in
Johannesburg
Consolidated Investment Company v Johannesburg Town Council
1903 TS 111.
In this kind of review Parliament confers a statutory
power of review upon the court. In such a case it was held in the
Johannesburg Consolidated Investment Company
case
supra
at 117 that the court could:
“…
enter upon and decide the matter
de novo
.
It possesses not only the powers of a court of review in the legal
sense, but it has the functions of a court of appeal with the

additional privileges of being able, after setting aside the decision
arrived at …, to deal with the whole matter upon fresh

evidence ….”
[21] This notwithstanding, in
Nel’s
case
supra
,
the Supreme Court of Appeal held that it was desirable that the
grounds of review should be formulated so as to clearly bring
such
grounds within the purview of those enumerated in
section 6(2)
of
PAJA. In this regard Van Heerden AJA stated at p. 290-291 para [29]:
“
By
giving 'legislative form and detail to the fundamental principles of
administrative law entrenched in s 33 of the Constitution',
the PAJA
introduced a new era in South African administrative law, placing the
control of administrative power - including the
judicial review of
administrative action - largely on a statutory footing.  As is
evident from the  above-quoted passage
from the judgment of
Innes CJ in the
Johannesburg
Consolidated Investment Co
case,
the third (wider) kind of review appears to have more to do with the
powers of the Court of review and the evidence
which such Court may
take into consideration rather than with the grounds of review. It
can therefore be argued that the 'material
disparity' ground of
review referred to by the Constitutional Court in the
Gauteng
Lions Rugby Union
case now also falls within the grounds of review listed in s 6(2) of
the AJA.”
[22] In the circumstances the applicants correctly formulated their
grounds of review in accordance with the provisions of section
6(2)
of PAJA. The power which the court has in adjudicating the matter and
evidence which may be taken into consideration, is however
wider than
the provisions of PAJA.
[23] Mr
Buchanan
,
on behalf of the respondent,
argues that the applicants would become entitled to “reasonable
remuneration for services actually
rendered” when the services
have been rendered. Until such time as a claim has been proved in
respect of the encumbered asset,
so the argument goes, the
distribution from the proceeds of such asset cannot be finally
determined and the services of the liquidator
are incomplete. On this
basis it is contended that applicants are only entitled to the tariff
fee in respect of the disposal of
the specific assets once such
assets have been sold
and
the distribution of such proceeds
can be established. Depending, in this case, upon whether claims are
eventually proved by Absa
or not, the proceeds of such sale may
eventually either be allocated to the secured creditor or to the
general residue, or indeed
to the Guardian’s Fund in certain
circumstances. For this reason it is contended that the applicants
cannot, as a matter
of law, raise a claim for remuneration until a
final distribution and liquidation account has been drawn and his
duties have been
completed.
[24] It was argued accordingly that the respondent was entitled to
“reduce” the applicants’ remuneration set
out in
the account as was done. If it would be wrong in law, so it is
argued, for the applicants to raise the remuneration set
out in the
account at this stage, then, procedural fairness under PAJA becomes
irrelevant as the application cannot succeed. It
was conceded,
however, that if I hold against the respondent on this aspect the
application should be allowed. In the circumstances
I do not think
that it is necessary to consider the grounds of review under PAJA,
which emerge from the papers, save to the extent
set out below.
[25] Mr
Buchanan
has been unable to refer me to any
authority in support of his proposition. He argues that it must
follow from the fact that the
remuneration to which a liquidator is
entitled is “reasonable remuneration for his services”.
[26] I revert to section 384 of the Companies Act. Subsection (1)
provides that a liquidator shall be entitled to reasonable
remuneration
for his services which are to be taxed by the Master in
accordance with the prescribed tariff of remuneration. I have
referred
to the tariff above. Subsection (2) then confers upon the
Master the power to reduce or to increase the sum of the remuneration

which is yielded by the taxation exercise, if in his opinion there is
good cause to do so. In addition the Master has the power
to disallow
such remuneration either wholly or in part on account of any failure
or delay by the liquidator in the discharge of
his duties. In the
present case there is no suggestion of the latter.
[27] In respect of the former, the Supreme Court of Appeal, in
Nel’s
case,
supra
, referred with approval to the analysis of the
court
a quo
of the provisions of section 384(2). Van Heerden
AJA at 284A-C said:
“
The
Court
a
quo
analysed the provisions of s 384 and held, in effect, that the
dominant provision of this section is the entitlement of the
liquidator
to 'a reasonable remuneration' for 'his services' in terms
of ss (1). Any reduction or increase in the liquidator's remuneration

by the Master in terms of ss (2) must still result in a
reasonable remuneration for the liquidator's services. This being
so,
the words 'such remuneration' in ss (2) must be read as referring to
the 'prescribed tariff of remuneration' mentioned in ss
(1),
viz
the amount of remuneration arrived at by applying the tariff.”
[28]
Later, on the same page G-H she states:
“…
the
Master, as a statutory functionary, is not free to choose whether or
not to tax a liquidator’s remuneration – the
Master
must
tax in accordance with the tariff (s384(1), but having done so,
may
reduce or increase the amount arrived at by applying the tariff if,
in his or her discretion, there is ‘good cause’
to do so.
The dominant provision in s 384(1) remains that the remuneration to
which a liquidator is entitled is
remuneration
for work or services rendered,
not a set commission,
and
that it must be
reasonable
.
The determination of ‘reasonable remuneration’ by the
Master involves, in the first instance ‘taxation’
in
accordance with the tariff, which includes the categorisation of
assets under the various tariff items in order to apply the

(percentile based) tariff to each of the items thus identified. The
tariff serves as a point of departure for the determination
of the
appropriate fee.”
[29] Mr
Muller
, who appears on behalf of the
applicants, emphasises that tariff B, forming part of Schedule 2 to
the
Insolvency Act, read
with Form CM104 to the Companies Act,
provides that trustees in insolvency are entitled to 10% on gross
proceeds
of movable properties
sold
or on “the
gross amount
collected
” under promissory notes for book
debts and 3% “on the gross
proceeds
of immovable
property” and other assets “sold” (counsel’s
emphasis). He contends therefore that the entitlement
arises when the
proceeds of the sale have been received or the moneys have been
collected.
[30] A consideration of the account submitted shows that the
remuneration claimed by the applicants in each instance relates to

assets already sold and proceeds already collected. Repeated requests
to the respondent to advise of any query which he may have
in respect
of the account went unanswered. The account duly lay for inspection
and no creditor had any objection to the account.
[31] On a careful consideration of the argument presented I do not
think that the conclusion which Mr
Buchanan
contends
for necessarily follows from the fact that a liquidator is entitled
to reasonable remuneration for his services. The tariff
is determined
with reference to proceeds of property sold and amounts collected.
Once the amounts have been collected and the proceeds
of sales
received I think that the applicants are entitled to include these in
their account. Once that is done the respondent
is obliged to tax the
bill in accordance with the tariff. I can find nothing in the
Companies Act, the
Insolvency Act or
in the regulations which
supports the submission that proceeds of particular assets should be
excluded from the taxation until
a claim is proved in respect of the
proceeds. In this case Absa had no objection to the account. If after
approval of the account
Absa were to prove a claim, the proceeds may
be allocated to it as a secured creditor in any subsequent account.
If not, it would
be allocated and distributed as required by law.
This is a mere formality.
[32] After the taxation of the account the Master may either increase
or reduce the amount yielded by the taxation if he believes
that
there is “good cause”. This would usually involve an
assessment of the amount of work required to affect the sale
or to
collect the money. In
Ex Parte Wells NO: in re Auto Protection
Insurance
Co. Limited
1968 (2) SA 631
at 634,
Galgut J stated:
“
There
may well be an occasion  when the tariff of fees prescribed in
the Schedule to the
Insolvency Act may
be over-generous and may allow
remuneration in excess of the value of the actual work done. It may
well be that there is a large
property centrally situated in one of
the bigger cities of the Republic which has to be sold and the act of
selling it may not
involve a great deal of work. To allow a
remuneration of 2½ per cent on the proceeds of such sale
may in some circumstances
constitute an overpayment of remuneration.
Similar considerations may well apply if the movable assets are of a
very high value
or if the amount of cash found is large.”
[33] The discretion conferred upon the Master in
section 384
is,
however, not restricted to this consideration. He is entitled to
reduce or increase the remuneration if there is “good
cause”
to do so and he is entitled to have regard to all services which the
liquidator has rendered and which he will in
future render in order
to finalise the winding-up of the estate. It does not follow, in my
view, that the remuneration of the liquidator
cannot be taxed before
a final liquidation and distribution account reflecting the
distribution of the particular asset is drawn.
On the contrary, the
Supreme Court of Appeal has consciously approved the taxation and
fixing of remuneration long before the services
of the liquidator
have in fact been completed and prior to a final liquidation and
distribution account.
Nel’s
case is an example
thereof. In
Nel’s
case a dispute arose and the
liquidators requested the Master to finally determine their
remuneration upon taxation of the first
liquidation and distribution
account. The Master, in that case, determined as follows:
“
In the
circumstances I hereby fix a total remuneration for the work done and
still to be done by the liquidator’s at an amount
of
R3 250 000,00; provided that their remaining duties are
carried out to my satisfaction. The amount should still be
in excess
of 1% of the eventual total projected asset situation in the estate
and in my view adequately remunerates them for the
amount of work and
complexity of work that they have done and must still do in this
estate.”
[34] Thus, having taxed the account in accordance with tariff B the
respondent assessed and fixed the liquidators’ reasonable

remuneration before the final liquidation and distribution account
was lodged and many months before the work required in the
liquidation was complete.
[35] The Supreme Court of Appeal in
Nel
supra
,
commenting with apparent approval of this approach, noted at p.
296G-297A:
“
In
determining the extent of the remuneration finally awarded, the
Master allowed for 15 months spent on the administration of the

Intramed estate - this being double the 7½ month period which
had expired from the date of liquidation to the date of filing
of the
first liquidation and distribution account - an average of 2½
hours per day, 22 days per month at an hourly remuneration
of R1
800 per hour for each appellant.”
[36] In all the circumstances the argument that it would have been
wrong, as a matter of law, to have regard to proceeds of the
sale of
the encumbered assets in the present matter when assessing the
remuneration of the applicants on the presentation of the
account
cannot be upheld. It follows that the decision of the respondent was
materially influenced by an error of law (PAJA
section 6(2)(d))
, was
taken for a reason not authorised by the Companies Act, the
Insolvency Act or
the regulations (PAJA
section 6(2)(a)(1)
and
6
(2)(e)(i)) and took into account irrelevant considerations (PAJA
section 6(2)(e)(iii))
and both the decision and the direction which
flowed from it fall to be set aside.
[37] In the result the following order is made:
1. The decision of the Master to tax down the applicants’ fees
to nil in respect of encumbered assets 1, 14, 15, 16, 17 and
18 in
the liquidation of Innova, is set aside.
2. The direction by the Master to the applicants to amend the first
liquidation and distribution account of Innova dated 30 November

2010, to reflect the applicants’ fees as nil is set aside.
3. The respondent is ordered to pay the costs of the application.
J W EKSTEEN
JUDGE OF THE HIGH COURT
Appearances:
For Applicants: Adv J Muller SC
instructed by De Klerk &
Van Gend Inc, Cape Town c/o McWilliams & Elliot, Port Elizabeth
For Respondents: Adv R G Buchanan SC &
Adv N Msizi
instructed by State
Attorney, Port Elizabeth